5 comments:

If you or I did this, we would already be pounding little from big rocks, yet these thieves are facing no criminal complaints at this time. Those will come soon enough, as the layers of this bezzle are pulled back. Many in the Blog world have been covering this for quite awhile, as well as the double dipping GS did with AIG. They thieves were fully hedged on what they were paid by AIG.

Market are certainly NOT efficient... if market truely reflect our economy, then why is spx at 1200s level? Are we better off in term of job condition (unemployment rate, the real rate not that stupid 9% rate), debt level, economic condition then in the 1980s? So why is SPX not at 200s?

Jake, on that note, I've been asked several people on the question why spx is not at 200s, but no one really give a good answer. Have we "created" more wealth or MORE DEBT since the 1980s? Yes, we created more "stuff" but those "stuff" and "wealth" isn't it just a mirage from the "debt" we've accumulated?

search equities in econompic search box and you'll get my view on equities more broadly, but in a nutshell here goes...

total returns of stocks should over the long term provide returns in the neighborhood of nominal GDP (the growth of the underlying economy) + dividends. the reason being earnings grow roughly at the same level as nominal gdp (more on this here http://tinyurl.com/y3d28um).

the S&P 500 crossed 200 in mid-1985. since then nominal GDP has risen 5.22% annualized, which would make the S&P = to 680. given that P/E ratios were probably too low (~10)then the figure should likely be more in the 950-1000 range given a 15 P/E.

as to your question about more wealth or debt... i think it is a combination of both. unfortunately the wealth has been increasingly "created" by less individuals who now have more of it, while everyone else thinks they have wealth, but in fact just has more debt.